Case Study: How a Specialty Components Manufacturer Beat Its TSA Deadline by Four Months
8/11/20264 min read
A private equity fund acquired a specialty industrial components division carved out of a larger diversified manufacturer, inheriting a fourteen-month Transition Services Agreement covering ERP access, email and collaboration tools, network connectivity, and cybersecurity monitoring, all previously run through the parent company's shared corporate infrastructure. The fund engaged Sigma Technology Consulting in the first month of ownership, specifically because the operating partner had seen a comparable carve-out at a different fund run into a costly, disruptive TSA extension on a previous deal.
Understanding What Was Actually Being Inherited
The engagement started with a detailed inventory of exactly what the TSA covered and how the business actually used each service day to day, a step that turned out to be more complicated than expected. The division's ERP usage was deeply customized to the parent company's broader manufacturing operations, with several integrations and reporting workflows that had never been documented because nobody at the division level had ever needed to understand them independently, they simply worked, maintained by the parent company's central IT team. Untangling which of these dependencies were essential to the division's actual operations, versus which were vestiges of the parent company's broader corporate structure that wouldn't be needed at all post-separation, took real investigative work in the first several weeks.
Building the Independent Environment
With a clear picture of actual requirements, Sigma built a phased separation plan: a new, standalone ERP environment configured specifically for the division's actual operations rather than replicating the parent company's more complex multi-division setup, an independent email and collaboration environment migrated with minimal disruption to daily operations, and new network and security infrastructure built to the fund's standard portfolio security baseline from the outset, rather than inheriting whatever configuration the parent company happened to have in place.
Data migration was sequenced carefully to avoid any operational disruption, running new and old systems in parallel during a defined cutover window rather than attempting a single, high-risk migration event. This added modest time to the project but eliminated the risk of a disruptive failure during a critical transition point, a trade-off the operating partner considered clearly worthwhile given how much was riding on operational continuity during the separation.
Finishing Four Months Ahead of the Deadline
The full separation was completed and fully operational ten months into the fourteen-month TSA term, giving the fund four months of buffer rather than racing the clock to the wire. That buffer proved valuable in its own right: the additional time allowed for a proper testing and stabilization period after cutover, catching and resolving several minor configuration issues in a low-pressure window rather than discovering them under the operational strain of a last-minute transition.
The fund exited the TSA entirely, without requesting or needing an extension, at standard rates the parent company had originally negotiated rather than any punitive extension pricing. The operating partner's rough estimate, based on the extension terms the previous, comparable deal had been forced into, put the avoided cost in the mid six figures, on top of avoiding the operational disruption risk entirely.
What Made the Difference
The single most important factor wasn't technical sophistication, it was starting the separation planning in month one rather than waiting for the deadline to become urgent. A fourteen-month TSA sounds like ample time until the actual scope of untangling deeply embedded dependencies becomes clear, and by the time that scope is understood, a fund that started planning late has already lost the months it most needed. Starting immediately, even before the full scope was understood, meant the discovery process itself happened early enough to inform a realistic plan rather than becoming a source of last-minute schedule risk.
The Broader Lesson for Carve-Out Acquisitions
Every carve-out acquisition carries some version of this same dynamic: systems that work fine under the TSA and hide real complexity that only becomes visible once someone starts trying to separate them. Funds that build technology separation into the very first weeks of the 100-day plan, rather than treating it as a project to schedule once other priorities settle, consistently finish with buffer to spare rather than negotiating from a position of urgency against a seller who has every incentive to make an extension expensive.
What the Fund Applied to Its Next Carve-Out
The fund has since applied the same early-start discipline to a second carve-out acquisition in an unrelated industry, treating the specialty components separation as a template for how the first thirty days of any future carve-out should be structured, regardless of how different the underlying business turns out to be. The specific technical details of each carve-out separation are inevitably different, but the operating partner has found that the discipline of starting discovery and planning immediately, rather than the specific technology choices themselves, is the more transferable and more valuable lesson across every future carve-out the fund pursues.
A Number Worth Remembering
The mid six-figure cost the fund avoided by finishing ahead of schedule, rather than negotiating an extension under pressure, is a useful benchmark for any fund evaluating whether early investment in a technology separation partner is worthwhile relative to the alternative. Measured against the total deal value, that avoided cost was a small percentage. Measured against the cost of the separation work itself, it represented a return on the engagement several times over, well before accounting for the operational risk that a rushed, last-minute separation would have carried.
Sigma Technology Consulting, Inc.
25 Years of Experience, Vetting & Procuring Technology Vendors
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